The British Energy Security Strategy – balancing the trilemma… again

Monday, 11th April 2022

“For years, governments have dodged the big decisions on energy, but not this one. We’ve got the ambition, we’ve got the vision – and, with this plan, we’re going to bring clean, affordable, secure power to the people for generations to come.”

 Boris Johnson’s summary of the Energy Security Strategy brings us back to the energy trilemma of old. Rapidly rising energy bills are the core of a burgeoning cost of living crisis, a geopolitical emergency bringing security of supply into stark focus, with a backdrop of stretching decarbonisation targets and commitments.

The strategy edges us back into talk of the ‘diverse mix’ of energy transition of a decade ago. However, Small Modular Reactors and hydrogen now take the place of onshore wind and carbon capture technology. The Government’s stretching ambition in offshore wind is to be celebrated – the Renewables Roadmap of 2010 optimistically eyed 40GW in 2030 from a baseline of 1.3GW. With over 10GW now operational in the UK, floating foundation technology, cost reductions, and permitting and grid streamlining plans in place, 50GW feels like a reachable aspiration.

Doubling the goals for hydrogen production is a welcome market signal and allays some of the issues on managing energy demand. Some concerns around the decarbonisation implications of hydrogen are addressed by confirmation of new auctions for green hydrogen plant, but businesses will still desire greater clarity on the subsequent infrastructure plans – and prioritisation of which sectors will receive the final product.

The nuclear sector will be delighted at the outcome of negotiations which provide the new ambition for 24GW of capacity by 2050, and by the strategic direction offered by a new Great British Nuclear agency. However the opportunity will only be fully realised if time and resource is focused on tackling development and cost barriers collaboratively by teams across Whitehall and beyond. No10 and BEIS may have won this negotiation, but as we have seen before (including on Swansea tidal power) Treasury priorities ultimately dictate the calls on the individual contracts that get projects to final investment decision.

The reopening of North Sea oil and gas has been regarded by some as a step backwards, but in many ways it’s a reflection of the political situation. While the UK has in many ways exceeded expectations in renewable electricity deployment, the full suite of low carbon infrastructure to enable the expansion into generation to support EVs and low carbon heating isn’t yet in place.

Many commentators –and indeed Cabinet Ministers – have noted that the cheapest, greenest and swiftest solution to imported electricity challenges is onshore wind expansion across the whole of the country. Political pressure, though, seems to be making the near-term realisation of planning changes unlikely. All eyes will be on the feasibility and appetite for resurrection of community benefit schemes.

Today’s publication speaks to the energy trend that those in the industry are all too familiar with – that strategic infrastructure planning remains in the grip of election cycles. Unlocking a truly diverse mix (that also includes onshore wind, solar farms, CCUS, low carbon and districting heat) will be the solution to buffeting domestic customers – household and industrial – from the coming storms while we ride the economic and environmental challenges over the next five to ten years.

Takeaways from the Strategy:

  • It is short – there is a lot of detail yet to come and a lot of difficult decisions still to be made. On nuclear alone, a 24GW target is ambitious, but it is a long way for projects to reach final investment points.
  • There is little immediate relief for the consumer, with the Business Secretary Kwasi Kwarteng having to admit to press yesterday morning that the strategy is “more of a medium three, four, five year answer”. More immediate cost savings for households on energy efficiencies have taken a backseat – and that spells political danger for the Government. Opportunities such as cutting the timeline for introducing zero carbon homes standards or reversing cuts to EV grants were missed.
  • Beyond hydrogen, investors in low carbon fuels and transport will be disappointed, having made repeated calls for pricing mechanism support through the likes of Contracts for Difference (CfD).
  • Big questions remain over the grid infrastructure and capacity that are yet to be resolved. If Government is to expand green hydrogen, accelerate electric vehicle uptake and grow offshore wind, these are questions that will need answering in the immediate term.
  • Organisations or industries looking to make a business case should take note of the effort throughout the strategy and press release to highlight numbers on job creation – something that the Conservatives will no doubt plan to reuse in the next General Election to their Red Wall seats.

    Contact Emily Carter-Kandola, Associate Director, Lexington Communications
    T: 0161 711 0296
    M: +44 (0) 7495 364 892